What Performance Method Best Represents Performance? Time-Weighted Rate of Return or Internal Rate
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Author: Stephen J. Church
What Performance Method Best Represents Performance?
This paper identifies an interesting dichotomy about investment performance. The best mutual funds of the last ten years outperform the S&P 500 Index by 1% per year, on a time-weighted basis. However, the accumulated assets in those funds are almost equal to the same amount of assets that would have been accumulated by investing in the S&P 500 Index. How can we explain this?
